I am a research fellow at the Hoover Institution, at Stanford, and the Cullen Professor of Economics at the University of Houston. I am also a research professor at the German Institute for Economic Research Berlin. My specialties are Russia and Comparative Economics, and I am adding China to my portfolio. I have written more than 20 books on economics, Russia and comparative economics. I blog at paulgregorysblog.blogspot.com.

How Krugman Would Ru(i)n Steve Jobs' Apple

The Left considers Steve Jobs, the charismatic PC pioneer, a self-centered individualist, who did not conform to elite etiquette. As Warren Buffet and Bill Gates gave away money with great fanfare, Jobs quietly devoted himself to creating value in Apple. He was conspicuously silent as Buffet recruited the super rich to argue for higher taxes. He told President Obama unwelcome truths (“Apple jobs are not coming back to America”). He advocated school vouchers and the emphasized the importance of the family (oral history interview). He did not dash to DC to testify on the latest fad or navigate the elite cocktail party circuit. He had more important things to do.

Although Steve Jobs was a major donor to Democrat causes, his errant behavior did not sit well with the “progressive” political class. Now six months after his death at age 56, the attack on his legacy is in full swing, fueled by Apple Computer’s new status as the world’s richest corporation.

Image via CrunchBase

The Left’s standard bearer, Paul Krugman snidely labels Steve Jobs (Jobs, Jobs, and Cars) the “heroic entrepreneur, the John Galt, I mean Steve Jobs-type ‘job creator’ Republicans love.” Krugman rates Jobs’ achievements as inconsequential relative to Obama’s Detroit bailout – “the single most successful policy initiative of recent years.” Per Krugman, real heroes preserve vital “economic ecology and industrial clusters,” even if it takes taxpayer money. The heroes are not rugged individualists but union-industry-government partners, who, according to Obama’s State of the Union address, “work as a team” and “get each other’s backs.”

Krugman primary complaint is that Apple creates wealth, not jobs and doesn’t care if jobs go to Asia. (The Times chides that Jobs did not even bother to visit Apple’s “sweatshops” in China before his passing). Although Apple’s market capitalization is fifteen times GM, Krugman huffs-and-puffs at its meager 60,400 jobs worldwide compared to GM’s 252,000. Unfortunately, “almost none” of Apple’s 700,000 “indirect employees” are in America. (That seems like a pretty tricky calculation, but somehow Krugman knows the truth). In Krugman’s convoluted world, companies exist to provide jobs, not to earn returns for their owners by efficiently supplying products we want at prices we can afford.

The Left’s disregard for Steve Jobs has deep roots that transcend specific personalities. A “heroic entrepreneur,” who creates and brings to market life-transforming products at affordable prices, challenges the Left’s familiar narrative of evil capitalists earning obscene profits by exploiting downtrodden workers. By their narrative, the common man’s only protection is a benevolent interventionist state, which keeps the rich in check and makes them pay “their fair share.”

The Jobs narrative turns the Left’s argument on its head: We are all the beneficiaries of the wealth and consumer surpluses created by the Steve Jobs, who take for themselves only a small portion of the wealth they create. At the time of Jobs’ death Apple insiders owned only one percent of Apple stock, leaving $500 billion for outsiders. Of even greater value are the new and innovative products (IPads, IPhones. Google, Beta blockers, endoscopic surgery, etc) they create, which improve the quality of lives and raise living standards.

Two scenarios place the competing “heroic entrepreneur versus economic ecology” narratives in context: Apple Computer versus the Apple Computer that a Krugman would create as its CEO.

First, CEO Krugman would unionize Apple employees, except engineers and professional staff. Apple’s union contract would set favorable work rules, generous fringe and retirement benefits, implicit racial and gender quotas, last-in, first-out hiring and firing, and designated levels of domestic jobs. The union contract would raise the wages of unionized employees to “fair” levels relative to non-unionized engineers and professionals.

Second. CEO Krugman and his board (comprised of college professors and ex-government officials) would take fixed salaries capped at one million dollars with no bonuses or stock options. They vow not to succumb to corporate greed.

Third, CEO Krugman would agree to pay Apple employees world-wide a living wage (equivalent to the U.S. minimum wage), irrespective of local wage rates. A union vote would be required on outsourcing decisions.

Fourth, CEO Krugman would agree to share Apple’s “outrageous” profits fairly. Profits would no longer be plowed back primarily into product development. One quarter of Apple profits would be earmarked for a new company, Green Apple, to fight global warming and other ecological dangers. The rest would be shared with shareholders as dividends, employee bonuses, grants to various stakeholders, and set aside to fund a new Apple Charitable Foundation.

Fifth, CEO Krugman would form an Apple, union, and federal government partnership to redirect Apple from frivolous entertainment and networking products to applications that save energy, reduce pollution, and contribute to the general well being of mankind. Apple and union representatives agree to meet regularly with their counterparts in the energy, commerce, and transportation departments to decide on product development and financing.

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It’s difficult to take the writer seriously when he seems to be so sloppy with the writing and the details. I’ll just mention one that makes the writer seem a bit out of touch. Jobs wasn’t 46 when he died. He was 56. That’s ten years difference. That’s quite a large amount of time. Enough time for two wars, a looted republican economy and a complete resurgence of Apple. Please get your facts straight before making your silly argument.

Really? That was an obvious typo. But that being said I find your statement immature and lacking credibility. Other than the error you mentioned you could not speak to the subject of the article. Exactly like most leftests. Never speaking to topic.

It depends on how you define “created.” Considering there are well over 500,000 apps plus over 100,000 iPad apps that number may be conservative.

If you take into account the people who make the computers/iphones/iphones/ipads/ipods plus all those servicing those devices let alone the app developers then you’re most likely looking at a much higher number. Should we include the impact the iphone has had on the service providers like AT&T & Verizon (not every employee, but how many people did AT&T need to add because of the iPhone)?

A Nobel prize in economics does not inoculate you from bad economics when you are pressing too hard to make a political case. Krugman seems to be making the incredible claim that Apple is too productive (and hence offers too few jobs). Should Apple become less productive and then it will have more jobs? Does he really believe the main task of a business is to create jobs?

I don’t have a Nobel either, but I can tell you that if I ran my business like Krugman would advise then I’d be out of business. Krugman may be smart when it comes to “economies of scale” (one of the areas the Nobel committee cited), however he has very little, if any, business sense. I’d love to see Mr. Krugman try to run a business.

He is a self-admited defender of the “welfare state” (his words) and is known for advising Enron executives on economic and political issues.

Considering his record as shill for the left and the laughing stock the Nobel committee has become in recent years (for anyone who is not an elitist), I’ll take Mr. Gregory’s observations over Mr. Krugman’s any day of the week.

Like all collectivists (or in the political context, statists) Krugman doesn’t think (maybe I should end it there) that businesses, nor the individuals who work for them, have the right to exist for their own sake. He does not think in realistic, actual terms. He attempts to deny reality by arguing for policies that come from a vacuum environment created in an alternate reality of his impotent mind. Businesses are only meant to create jobs, not products for people to buy. If a business does create a product or products it must be for all, not for a target market. Innovation should not be created and developed, it must be approved collectively. Whatever the mob says is good is law, regardless of the objective facts of reality. What Krugman doesn’t realize (or maybe attempts to evade) is that Apple, like anything capitalist, does not and cannot exploit anyone because any form of participation is voluntary, not forced. I, personally, chose to buy an Ipod and Ipad. No one forced me to. I determined that the price for the products were reasonable at the time, and I had the money for the purchase. Let’s look at the bailout of GM now. I didn’t want any of their products. Yet, in order to keep them in business, I was forced to pay money to them by means of taxation. Too big to fail? I say too bad to succeed.